161. At the beginning of the year (January 1), Maurice and Sons has $12,000 of common stock outstanding and retained earnings of $4,200. During the year, the company reports net income of $3,200 and pays dividends of $1,200. In addition, the company issues additional common stock for $5,000. Prepare the statement of stockholders' equity at the end of the year (December JN). 2. If a company understates its ending balance of inventory in year 1 and it records inventory correctly in year 2, which one of the following is true? A. Net income is overstated in year 1. B. Cost of goods sold is understated in year 2. C. Net income is understated in year 2. D. Retained earnings is understated in year 2. 2. If a company understates its ending balance of inventory year 1 and it records inventory correctly in year 2, which on the following is true? A. Net income is overstated in year 1. B. Cost of goods sold is understated in year 2. C. Net income is understated in year 2. D. Retained earnings is understated in year 2